The Ontario Court of Appeal has confirmed in a 4-1 decision that
Parliament has the power to enact a minimum national price on
greenhouse gas (GHG) emissions under the Constitution Act,
1867.1 This issue will likely be decided by the
Supreme Court of Canada in 2020.

What you need to know

Four judges of the Court of Appeal
have affirmed that the federal Parliament has legislative authority
to enact the federal Greenhouse Gas Pollution Pricing Act
(GGPPA) which enacts a minimum national price on GHG emissions. One
judge dissented.

The basis for federal authority is
Parliament's power to make laws for the "Peace, Order and
Good Government" of Canada under the Constitution Act,
1867.

This follows a similar result in the
Court of Appeal for Saskatchewan, which upheld
the GGPPA (three judges to two). Challenges by two other provinces
(Alberta and Manitoba) are still pending.

The Greenhouse Gas Pollution Pricing Act and the
provincial references

The GGPPA was enacted to reduce GHG emissions across Canada. To
do so, the GGPPA imposes a federal fuel charge on the production,
distribution and importation of a variety of GHG-producing fuels.
The GGPPA also establishes output-based performance standards for
industrial emitters in covered sectors with emissions greater than
50 kt of carbon dioxide equivalent (CO2e)/year, and to facilities
with emissions between 10 and 50 kt that voluntarily opt into the
program. Both the federal fuel charge and the output-based
performance system (OBPS) apply only in designated provinces that
have not adopted prices on GHG emissions that meet the national
minimums under the GGPPA.2

Notably, the GGPPA is not intended as a scheme to raise revenue.
Rather, the proceeds of the federal fuel charge are primarily
required to be refunded either to the province in which the charge
is collected, or to taxpayers generally. Environment Canada is
still in the process of determining how revenue collected under the
OBPS will be used, though a substantial portion of that revenue is
expected to be reinvested in emission-reduction projects in covered
sectors.

Four Canadian provinces have challenged the constitutionality of
the GGPPA, arguing that the need to regulate greenhouse gasses is
outside the powers of the federal government. Alberta, Saskatchewan
and Ontario have each done so through a constitutional reference,
meaning that the matter is not heard by a trial-level court, but
rather goes to each referring province's Court of Appeal.
Manitoba has challenged the legislation through an application for
judicial review. Earlier this year, Saskatchewan's Court also
upheld the legislation in a three to two decision.

The constitutional issue

Since the Constitution Act, 1867 does not exclusively
assign environmental regulation to either level of government, it
is an area of shared constitutional responsibility. While
theoretically the federal government should have jurisdiction over
"residual" or unassigned areas of responsibility, the
provinces' power to regulate "property and civil
rights" swallowed most of what can be considered
"residual." As a result, when the federal government
seeks to regulate environmental issues, it must either ground it in
a specific enumerated power (such as criminal law, which has been
found to be the constitutional basis for the federal
government's main environmental statutes) or the "Peace,
Order and Good Government" (POGG) clause.

"Peace, Order and Good Government"

The case law under POGG enables the federal government to
regulate in three circumstances: national emergency, matters of
national concern and when there is a "gap" in the
constitutional framework. In this case, the federal government
relied on the national concern branch. However, because matters of
national concern have the potential to overreach into areas
properly under provincial jurisdiction, the test for national
concern is very stringent. It requires that a matter be of concern
to the entire country, and have a "singleness, distinctiveness
and indivisibility that clearly distinguishes it from matters of
provincial concern."3

In this case, the Court concluded that the GGPPA did not involve
an unconstitutional intrusion into provincial jurisdiction. Canada
argued that the purpose of the law (or "pith and
substance") was to regulate the "cumulative dimensions of
GHG emissions." Writing for the majority, Chief Justice
Strathy disagreed but identified the purpose of the law as
"establishing minimum national standards to reduce GHG
emissions." The Court then asked whether it contained the
"singleness, distinctiveness and indivisibility" required
by the national concern branch.

Quoting from the text of a leading constitutional scholar, it
noted that "the most important element of national concern is
a need for one national law which cannot realistically be satisfied
by cooperative provincial action because the failure of one
province to cooperate would carry with it adverse consequences for
the residents of other provinces." Because, in the words of
the majority, the nature of GHG emissions which "emitted
anywhere" cause "climate change everywhere," it
found that this criterion was readily met. It also concluded that
the impact on provincial jurisdiction was not so serious that it
would "disrupt the fundamental distribution of power that
characterizes Canadian federalism." This is because the GGPPA
imposes only minimum national standards and preserves the ability
of provinces to design their only regulatory regimes provided they
meet these standards.

Associate Chief Justice Hoy wrote brief concurring reasons,
disagreeing with the majority on the central purpose of the law,
holding that it is "establishing minimum national greenhouse
gas emissions pricing standards to reduce greenhouse gas
emissions." The difference, in her view, is that it would
constrain the court's approval of the POGG power to the pricing
mechanism, presumably with other mechanisms to be evaluated if and
when they are enacted.

Justice Huscroft dissented, writing that "establishing
minimum national standards" is not an appropriate
characterization of the purpose of a law for constitutional
purpose, writing "[t]he difficulty is that [the Chief
Justice's] reasoning begs the question: it depends on the
premise that a national standard is required – something
that, by definition, no province can establish." He would have
found that the purpose of the GGPPA is to regulate greenhouse gas
emissions and that this is too broad a subject for POGG's
national concern branch.

Implications

With the decision from the Saskatchewan Court of Appeal already
headed to the Supreme Court, and the Ontario government announcing
it will also exercise its appeal right, the provincial Courts of
Appeal will not be the last word. However, what is clear from the
decision (and the parallel Saskatchewan case) is that the analysis
will involve close consideration of the "pith and
substance" of the legislation.

Footnote

1 Reference re Greenhouse Gas Pollution Pricing
Act, 2019 ONCA 544

2 Currently, those provinces are Saskatchewan, Ontario,
New Brunswick and Manitoba. Alberta will be added as of January 1,
2020.

3 Ibid. at para. 104

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